No Cures

Health-care reform is one of those perennial issues that inspires passionate debate but resists an easy solution. In this presidential election year, the problems–historically high numbers of the uninsured; double-digit, budget-busting increases in costs to employers; rising copayments and deductibles for the insured workers–clearly outweigh the solutions being proposed by President Bush and John Kerry.

    Experts sorting through the respective health-care proposals being put up by Bush and Kerry say both plans would put a dent in the number of uninsured. That would be accomplished through a variety of incremental fixes and one big idea from Kerry–creating an entirely new plan to relieve employers of catastrophic health-care costs. But neither candidate is offering a comprehensive solution to the problems facing the health-care system, particularly costs that are shouldered by employers. “I don’t think there are any silver bullets out there,” says Neil Trautwein, vice president for human resources policy at the National Association of Manufacturers. Both candidates place emphasis on extending health-care coverage to the 45 million Americans now living without insurance.

    The two programs take decidedly different approaches. Bush’s plan places more responsibility on individuals, providing tax breaks that would enable them to take care of their own insurance needs. Kerry wants to dramatically expand government’s role in providing insurance to the uninsured, primarily by expansion of the Medicaid program. The latter plan is more encompassing and more expensive; low estimates of the Kerry plan begin at $650 billion over 10 years. The conservative American Enterprise Institute, in estimates being used by Bush, places the cost of Kerry’s plan at $1.5 trillion. The think tank estimates that Bush’s plan would cost $129 billion over 10 years. Bush’s plan would place more emphasis on individual decision-making, using tax credits and programs like health savings accounts to extend coverage to 2 million to 6 million Americans. Government-backed insurance plays a much bigger role in Kerry’s package of benefits. Central to the plan is a proposal that would provide health coverage to an estimated additional 27 million of the uninsured, nearly all of that by expanding eligibility for Medicaid, the federal-state program for the poor.

    Findley Davies Inc., a human resources consulting firm in Toledo, Ohio, predicts that health-care costs will increase 14 percent in 2005, slightly less than the 15 percent the firm is projecting for 2004, but four times greater than projected salary increases and the rate of inflation. Bruce Davis, a principal practice leader at the firm, says two factors are largely responsible: the aging of the working population and the availability of expensive new medical technologies. The pain of those costs is being felt throughout the system. Employers have coped with three straight years of double-digit increases in medical plans by shifting costs to workers. Retirement health benefits have been eliminated at many companies, and workers have been asked to contribute more in the form of copayments and deductibles. Even so, employers still pay roughly three-quarters of the $10,000 it costs to provide family coverage for each employee.

    Last year, the ranks of the medically uninsured grew by 1.4 million, the third straight year of increase. The 45 million uninsured Americans in 2003 represent 15.6 percent of the population, up from the 12.9 percent that did not have health insurance in 1987. Although Kerry is hammering away at Bush for the growing number of uninsured Americans–4 million more than when Bush took office in 2001–the problem began long before Bush was sworn in. While the number of uninsured Americans is at a historic high, as a percentage of population the numbers are about where they were under President Clinton. Clinton’s own national health-insurance plan, far more sweeping than Kerry’s because it would have provided insurance to all Americans, survived only as long as the election. It died a quick death once Clinton took office.

    A key component of Kerry’s plan is a stop-loss reinsurance plan for employers that calls for the federal government to step in and absorb most of the expenses of high-cost medical cases once they reach certain thresholds, rising from $30,000 in 2006 to $50,000 in 2013.

    Kenneth Thorpe, chair of the Department of Health Policy and Management at Atlanta’s Emory University, estimates that even though employers would have to agree to provide insurance to all their employees, companies would see a net benefit. When fully implemented, the Kerry plan would provide $35 billion a year in premium rebates to employers, while providing additional coverage would cost employers about $8.2 billion, producing an estimated net benefit of $26.6 billion, Thorpe says. Overall, the net cost to taxpayers of Kerry’s plan would be $653 billion over 10 years.

    The Democratic candidate is proposing to pay for the program by repealing tax breaks now enjoyed by those with incomes of more than $200,000. But there are enough strings attached–Kerry’s plan would be contingent on employers’ agreeing to provide health insurance to all their employees, including part-timers and seasonal workers–to make the package a tough sell in Congress.

    Kerry’s plan to expand Medicaid is designed primarily for three groups. Uninsured children in families that are under 300 percent of the federal poverty line ($55,200 for a family of four) would go into Medicaid and the State Children’s Health Insurance Program. Uninsured parents in families of four making under $36,800 would become eligible for state Medicaid programs as well as the children’s programs. And starting in 2008, states would enroll in Medicaid uninsured single adults and childless couples in poverty ($12,120 per couple or less). Small businesses and persons between 55 and 64 who are between jobs would be able to enroll in new health pools with the same plans offered to members of Congress and federal workers. Getting anything done will require maneuvering through the minefield of the nation’s health-care debate. An opinion piece written for the Wall Street Journal by John Goodman, president of the conservative National Center for Policy Analysis, attacks what he calls “Kerrycare” as potentially far more costly than advertised. Goodman predicts that millions of middle-income families will be enrolled in Medicaid and that many more would be pushed out of their private health plans once employers realize that the government medical insurance program is an option.

    Bush’s plan is no less controversial. Consider the fate this year of three of the president’s bedrock Republican issues. He is proposing reform of the medical-malpractice system, with caps on pain-and-suffering injuries. He would like to create a new insurance vehicle association health plans, that would allow small businesses and associations to form purchasing pools to buy insurance free of traditional state regulatory oversight. Also featured in the plan is a relatively benign change in rules governing flexible spending accounts, one that would allow employees to carry forward $500 in unused health benefits from one year to the next. Votes on the legislation were along strict party lines, with Republicans overwhelmingly in favor and Democrats just as strongly opposed. There are predictions that the proposals, with the possible exception of changing flexible spending accounts, will die in the Senate, which is more evenly divided along party lines.

    The National Association of Manufacturers, which represents scores of large and small manufacturers, favored all three Republican bills. “Rising health-care costs are a constant threat to business survival and a drain on our nation’s ability to compete in the global economy,” the association wrote in a statement supporting the measures. The proposals are also being strongly supported by the Retail Industry Leaders Association, which includes some of the largest employers in the nation. But the employer groups face powerful opponents like the 1.4 million-member American Federation of State, County and Municipal Employees Union. Charles Loveless, the union’s director of legislation, said in letters mailed to elected leaders that the bills would drive up the cost of coverage for businesses and workers alike. Loveless says the union also strongly objects to any watering down of malpractice law because it offers protection to workers. He describes FSAs as tax shelters for high-income wage earners.

Where the candidates agree
    Neither side is likely to back down. Kate Sullivan Hare, executive director of health-care policy for the U.S. Chamber of Commerce, says malpractice reform is key. “That is incredibly important. It’s a contributor to health-care inflation.” As for Kerry’s plan for the government to step in and take over most of the cost of catastrophic health care, Hare says business leaders she has talked to find it interesting, but worry about government’s expanded role and the tax increases. “Kerry gets points for addressing a real problem,” she says. “But he does it in a way that has government stepping in.”

    Linda Bergthold, a senior consultant on health-care policy with Watson Wyatt Worldwide, says she wants to see the catastrophic-health-care plan fleshed out. “Our clients are intrigued by it, but they just don’t know enough about it. The idea of pooling catastrophic claims makes a lot of economic sense.”

    Despite the sharp differences, there are some similarities that could indicate the shape of post-election health-care reform. Both Bush and Kerry include such things as wellness programs, disease-prevention campaigns and tax credits to serve as inducements to both employers and workers to make smarter health-care choices. Both also believe that significant economies could be realized through technology. Much of the health-care system still clings to paper records and has been notoriously slow in developing technology to help with patient care.

    Among employers, there also seems to be a growing belief that they will have to make their employees a lot smarter about health choices. Davis, the Ohio-based consultant, believes that human resources executives should lead the way. “In the end it comes back to employees’ taking charge of their health and becoming engaged in how they access the health-care system,” he says. “Clearly it is not going to be easy. It will take time.”

Workforce Management, October 2004, pp. 46-48 — Subscribe Now!